What Can We Do to Revitalize Communities After the Foreclosure Crisis?

Real Estate

The United States is still grappling with the housing crisis, with more foreclosures predicted for 2012. If you’re curious to learn more, check out our recession photos.
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If you’re a homeowner, chances are there’s at least one bank-owned property in your area. It’s a sad reality for many of us. Maybe you’ve witnessed the heartbreaking eviction of a neighbor, or you’ve seen the telltale signs of foreclosure: a “bank owned” sign on the for-sale listing, or a vacant house with a neglected yard and peeling paint.

Foreclosures don’t just hurt the individuals who lose their homes; they also hurt the entire community. They drive down property values (which have already taken a hit), and the abandoned properties attract criminal activity such as theft and vandalism.

So, how did we get here? It’s a long story, but here’s a brief summary. In the late 2000s, the United States entered a severe economic recession, resulting in widespread layoffs and job losses. Many people were unable to keep up with their mortgage payments. Some had obtained risky sub-prime mortgages with high interest rates and adjustable payments that became unmanageable when the rates increased. When homeowners couldn’t make their payments, the bank repossessed the property. To make matters worse, some lenders engaged in fraudulent loan practices or mishandled the foreclosure process.

The past few years have seen an unprecedented number of foreclosures, overwhelming banks’ ability to process them all. Additionally, many banks have failed to maintain the properties they own, leading to abandoned homes and unfinished construction projects. As a result, some communities are now dotted with empty lots and unfinished houses.

Unfortunately, reports suggest that a new wave of foreclosures could occur in 2012 due to unresolved issues from the previous crisis. While we can’t solve the country’s financial problems, there are steps we can take to rebuild the communities that have been affected. These efforts can be divided into three categories, starting with measures to prevent foreclosures in the first place.

Ways to Avoid Foreclosures and Evictions

In the previous section, it was mentioned that if an individual fails to pay their mortgage, they will lose their home to the bank and be evicted. However, there are ways to prevent this from happening. One of the solutions is loan or mortgage modification. When a person takes out a loan to purchase a house, it is a binding agreement where the lender provides the money at specific terms, and the borrower agrees to repay it. Nonetheless, in some cases, the terms can be altered. Lenders may be willing to work with borrowers who are unable to pay their mortgage, by reducing the principal or interest rate, or converting an adjustable rate to a fixed one.

Typically, lenders prefer to modify the loan instead of foreclosing, as they might recover more money, and foreclosing can take time. There are numerous government and private organizations that can assist people in modifying their loans and avoiding foreclosures. For instance, the HOPE Now Initiative is a collaboration among the Federal Housing Commission, lenders, and counselors to help homeowners modify their loans and prevent foreclosure. Another program is the federal HARP (Home Affordable Refinance Program). However, these programs have specific requirements, and some argue that the government and lenders are not doing enough to help. Additionally, banks may refuse to modify a loan to avoid encouraging other borrowers to default on their mortgages.

Besides government and private organizations, there are also non-profits and community coalitions that educate individuals about their legal rights during and after the foreclosure process. Project No One Leaves is one such organization that provides free legal assistance to homeowners facing illegal foreclosures. They also help tenants of rental homes that are foreclosed upon. Though sometimes, it is not possible to prevent evictions, there are still ways communities can help in such situations.

It is essential to be aware of loan modification scams. Some companies take advantage of desperate homeowners and charge a high fee, promising unrealistic results, such as selling the house within a month and allowing the borrower to be free of their mortgage. Therefore, individuals should conduct research to avoid falling deeper into debt and seek free advice.

Addressing Urban Decay

Unmaintained and deserted properties encourage thievery and damage.
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Once upon a time, everyone knew their neighbors. Although this isn’t always the case now, certain individuals live in neighborhoods that have been established long enough to have a genuine sense of community, or have made an effort to cultivate them. If you don’t know or care about your neighbors when they’re present, then you may not care once they’re gone. Alternatively, you might think there’s nothing you can do about it either way. Nonetheless, many communities throughout the United States are not content to simply stare longingly at abandoned homes and pray for improvement. They take action.

If you reside in a community with a homeowner’s or neighborhood association, it’s probably simpler to accomplish, but individuals can do it as well. Sometimes, it’s as straightforward as one person mowing the lawn and trimming the bushes of the deserted lot next door, or collecting the free papers that accumulate at the end of the driveway. Associations may establish a task force to arrange clutter cleanups or even switch out seasonal decorations to make it appear as though the house is still occupied. This may seem foolish at first, but if you’re aware that theft and damage are genuine possibilities, it may be a significant deterrent. Community members may also undertake the task of contacting lenders and holding them accountable for the property’s upkeep.

Occasionally, neighbors are the ones who notify local governments about deserted properties since they don’t have the means to keep up with all of them otherwise. This brings us to laws regarding abandoned homes. Many places have them but lack the resources to enforce them, and that’s where community organizations can assist as well. However, some cities have found it necessary to pass or strengthen laws that make it very appealing for owners, even banks, to maintain their homes’ appearances. Some levy a special fee for deserted properties, impose fines if homes fall into disrepair, or even prohibit plywood on windows.

If you can’t keep people in their homes, at the very least you can maintain their homes’ appearances. This makes the community safer and makes those homes more attractive to potential buyers. Speaking of potential buyers, filling those deserted homes should be every community’s ultimate goal. And it’s not impossible.

New Residents, New Community Members

If a bank owns a house and already owns numerous other properties, why would it bother to find a tenant for the home in your neighborhood? Because the squeaky wheel gets the grease. Community organizations and leaders can call or write to lenders to inquire about a property’s status. They may be willing to disclose how much they’d like to receive for the home and how they plan to market it (if there isn’t already a sign). You could also attempt to persuade the lender to list the home with a local real estate agent rather than a large national company, which may make it simpler to sell. Gather any information you can find about home sales in your region to support your argument.

Project No One Leaves and other groups have been pushing major lenders to sell properties to non-profit community banks. These banks will then either mortgage them (at better terms) or rent them to current tenants or new homeowners. While the organization works to prevent eviction, the bank will help the current homeowners qualify for a loan by proving steady income and documented hardship that led to falling behind on their mortgage. If they qualify, the community bank will make an offer to the original lender for the home, allowing the homeowner to stay. In addition, community banks and local lenders may offer low-interest loans in areas that need revitalization to draw buyers.

Habitat for Humanity is known for building new homes, but it also has a Neighborhood Revitalization Initiative. This initiative brings together communities, local governments, businesses, nonprofits, churches, and other religious centers. The goal is to rebuild communities by working together. One aspect of this initiative involves renovating abandoned or foreclosed homes to prepare them for potential buyers. Everyone involved benefits from this initiative, including businesses that need new customers, the government that wants tax revenue, and nonprofits like NeighborWorks America that help educate community organizations on marketing and selling properties.

If there are foreclosed homes in your neighborhood, you can take action instead of waiting for a financial turnaround. This will not only benefit your community but also benefit you as a homeowner.

The author acknowledges living in a bubble but cannot ignore the foreclosure crisis, especially when it affects their own neighborhood. Bank-owned homes in their area have sold for a surprisingly small amount of money at auction, making it tough for homeowners who bought before the housing bubble burst. Nevertheless, the new owners usually maintain the property well, and it’s great to see people working together to rebuild their communities.

Related Links

• 10 Reasons Why You Should Get Homeowners Insurance
• Test Your Knowledge: House Buying Quiz
• What You Need to Know About Buying a House
• Understanding How Flood Insurance Works
• How to Sell Your Home Without a Real Estate Agent

Sources

• Boston Community Capital. “Stabilizing Urban Neighborhoods.” 2011. (May 18, 2012) http://www.sunhomehelp.org/
• Habitat for Humanity. “Neighborhood Revitalization Institute.” 2012. (May 17, 2012) http://www.habitat.org/env/NRI_default.aspx
• Immergluck, Dan. “Community Response to the Foreclosure Crisis.” Federal Reserve Bank of Atlanta. Oct. 10, 2008. (May 20, 2012) http://www.frbatlanta.org/filelegacydocs/dp_0108.pdf
• NeighborWorks America. “Designing a Place-Based Plan for Stabilization.” 2012. (May 17, 2012) http://www.stablecommunities.org/stabilization-planning
• NeighborWorks America. “Common Loan Modification Scams.” 2012. (May 18, 2012) http://www.loanscamalert.org/common-scams.aspx
• Potter, Erik. “Abandoned Brockton homes are being cleaned up under new ordinance.” Enterprise News. April 10, 2012. (May 18, 2012) http://www.enterprisenews.com/answerbook/brockton/x122729774/Abandoned-Brockton-homes-are-being-cleaned-up-under-new-ordinance
• Thompson, Nancy, et al. “Abandoned Homes Threaten Neighborhood Image.” Useful Community Development.org. 2012. (May 18, 2012) http://www.useful-community-development.org/abandoned-homes.html
• U.S. Department of Housing and Urban Development. “Foreclosure Recovery Strategies.” 2012. (May 17, 2012) http://www.hud.gov/offices/cpd/about/conplan/foreclosure/index.cfm
• Yip, Pamela. “Is a mortgage modification right for you?” The Dallas Morning News. May 11, 2012. (May 19, 2012) http://www.hopenow.com/news/Dallas%20Morning%20News_05_11_12.pdf

FAQ

1. What is the foreclosure crisis and how did it impact communities?

The foreclosure crisis refers to the period of time in the late 2000s when many homeowners were unable to make their mortgage payments and their homes were repossessed by banks. This had a devastating impact on communities, as families were forced to leave their homes, neighborhoods became blighted with vacant properties, and property values declined.

2. What are some strategies for rebuilding communities after the foreclosure crisis?

One strategy is to invest in affordable housing initiatives that provide safe and affordable homes for families. Another is to encourage community development projects that bring new businesses and amenities to the area, such as parks, grocery stores, and community centers. Additionally, providing resources and support for small business owners can help revitalize local economies and create jobs.

3. What role can local government play in rebuilding communities?

Local government can play a critical role in rebuilding communities by providing resources and funding for community development initiatives, such as affordable housing and small business support programs. They can also work to strengthen and enforce housing regulations to ensure that properties are maintained and kept up to code, which can help prevent blight and decay in neighborhoods.

4. How can community members get involved in rebuilding efforts?

Community members can get involved in rebuilding efforts by volunteering with local organizations and initiatives, attending community meetings and events, and advocating for policies and programs that support community development. They can also support local businesses and work to create a strong and vibrant local economy.

5. How can we ensure that rebuilding efforts are equitable and inclusive?

Ensuring that rebuilding efforts are equitable and inclusive requires a commitment to addressing systemic inequalities and working to ensure that all members of the community have access to affordable housing, good jobs, and other resources. This may involve targeting resources and support to historically marginalized communities, such as low-income families and communities of color.

6. What are some challenges that may arise during the rebuilding process?

Some challenges that may arise during the rebuilding process include limited funding and resources, resistance from community members who may be skeptical of change, and bureaucratic hurdles that can slow down progress. It’s important to address these challenges head-on and work collaboratively to find solutions.

7. How can we measure the success of rebuilding efforts?

Measuring the success of rebuilding efforts requires tracking a variety of indicators, such as the number of new affordable housing units created, the number of new businesses that have opened, and changes in property values. It’s also important to gather feedback from community members to ensure that their needs and priorities are being met.

8. What is the long-term impact of successful community rebuilding efforts?

Successful community rebuilding efforts can have a lasting impact on neighborhoods and the people who live there. They can create more stable and vibrant communities, improve access to affordable housing and good jobs, and help create a sense of pride and belonging among community members. Additionally, successful community rebuilding efforts can serve as a model for other communities facing similar challenges.